Re Redstar Transport (in liq) - [2020] VSC 547

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2020 03086

MARTIN FRANCIS FORD AND STEPHEN GRAHAM LONGLEY AS LIQUIDATORS OF THE SECOND TO EIGHT PLAINTIFFS AS NAMED IN THE SCHEDULE OF PARTIES

Plaintiffs

---

JUDGE:	Irving JR
WHERE HELD:	Melbourne
DATE OF HEARING:	Not applicable
DATE OF JUDGMENT:	28 August 2020
CASE MAY BE CITED AS:	Re Redstar Transport (in liq) & Ors
MEDIUM NEUTRAL CITATION:	[2020] VSC 547

---

CORPORATIONS – External administration – Application for directions regarding funds handling by external administrator – Where intercompany loans of substantial value adjudicated – Where independent advice sought, made available for creditors and acted on – Where dividends paid – Where liquidators remuneration and other costs of external administration incurred – Where companies in administration part of a corporate group – where one member of corporate group manages operations and finances – Where compliance with funds handling provisions would incur unnecessary costs in the administrations – Application allowed.

---

APPEARANCES:	Counsel	Solicitors
For the First Plaintiff	Ms R Zambelli	King & Wood Mallesons

JUDICIAL REGISTRAR:

The application

Martin Francis Ford and Stephen Graham Longley (the ‘Liquidators’) were appointed liquidators of the second to eighth plaintiffs (together, ‘the Redstar Group’) on 20 December 2018 for the purposes of a creditors’ voluntary winding up.

The Liquidators apply pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (‘IPS’) of the Corporations Act 2001 (Cth) (‘the Act’) for approval of their remuneration as the liquidators of the Third, Fifth and Seventh Plaintiffs.

The Liquidators also apply for directions pursuant to ss 65-45 and 90-15 of the IPS and in the court’s inherent jurisdiction.[1] The Liquidators seek directions that they are justified in:
[1]On 25 August 2020 the Liquidators sought leave to file an amended Originating Process. The effect of the proposed amended is to clarify that the Liquidators’ application for directions is made pursuant to ss 65-45 and 90-15 of the IPS and in the court’s inherent jurisdiction.

(a) their adjudication of seven intercompany loans of substantial value within the Redstar Group, each loan amount being an ordinary unsecured claim in the winding up of the relevant Redstar Group entity;

(b) the payment from the Fourth Plaintiff (‘Redstar Operations’) of dividends to creditors of several Redstar Group entities; and

(c) deducting their remuneration and other costs associated with the Second Plaintiff, Third Plaintiff and Seventh Plaintiff, from funds proposed to be held by Redstar Operations.

In accordance with r 9.2(2) and (3) of the Supreme Court (Corporations) Rules 2013, the Liquidators have given the creditors and relevant shareholders of the Third, Fifth and Seventh Plaintiffs notice of their application. The Liquidators have received no objections and their application for the remuneration determination and directions are unopposed.

Background

The Liquidators rely on two affidavits of Mr Ford, the first sworn 24 June 2020 and the second filed unsworn on 22 July 2020.

The Redstar Group comprised seven…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Keep reading for free

Create a free CaseChat account to read Re Redstar Transport (in liq) and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2020] VSC 547
Decision Date: 28 August 2020

CaseChat Overview and Summary

In the matter of Re Redstar Transport (in liq), the external administrator of Redstar Transport sought directions from the court regarding the handling of funds. The dispute arose as a result of the substantial intercompany loans that had been adjudicated. The court was tasked with determining whether the external administrator had complied with the relevant provisions of the Corporations Act 2001 (Cth) in relation to the handling of the funds. The case involved a corporate group where one member managed the operations and finances of the other members.

The legal issues before the court included whether the external administrator had acted in accordance with the funds handling provisions of the Corporations Act 2001 (Cth) and whether the external administrator could be excused from compliance with those provisions due to the impracticality and unnecessary costs it would incur in the administration. The court had to consider the specific circumstances of the case, including the independent advice that had been sought and made available to the creditors, the payment of dividends, and the costs of the external administration.

The court found that the external administrator had not strictly complied with the funds handling provisions of the Corporations Act 2001 (Cth). However, the court was satisfied that the external administrator had acted reasonably and in the best interests of the creditors. The court held that the external administrator was excused from compliance with the funds handling provisions due to the impracticality and unnecessary costs it would incur in the administrations. The court considered the specific circumstances of the case, including the substantial intercompany loans, the independent advice that had been sought and made available to the creditors, the payment of dividends, and the costs of the external administration.

The court allowed the application for directions and held that the external administrator had acted reasonably and in the best interests of the creditors. The court further ordered that the external administrator be excused from compliance with the funds handling provisions of the Corporations Act 2001 (Cth) due to the impracticality and unnecessary costs it would incur in the administrations.

Orders